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Lord Beaumont of Whitley: Before the noble Lord delivers his verdict in this case, I believe that he makes a very serious point. I am sorry that I did not intervene earlier. I hope that if at this stage the noble Lord withdraws his amendment he will return with something else at a later stage.

Lord Dixon-Smith: The noble Lord almost takes the words out of my mouth. I must look very carefully both at the response of the Minister and the wording of my amendment to see how it can be improved. The noble Lord will be relieved to hear that at least at this stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 141 not moved.]

Clause 125 agreed to.

8.45 p.m.

Clause 126 [Making of scheme]:

[Amendment No. 142 not moved.]

Lord Stoddart of Swindon moved Amendment No. 142A:

The noble Lord said: This is really a probing amendment. At present the Bill provides that a quality contract scheme must specify the area to which it relates. However, bus services are organised on a route basis and many different routes can cross the same area. It is also possible that more than one operator will provide services in any particular area. In its current form, therefore, the Bill fails to recognise the complexity of the present bus routes and appears to restrict the scope of quality contracts to a defined geographical area. That may not work.

I believe that a quality contract could and should be considered for one or more routes, not just one particular area. The amendment would allow scope for greater flexibility and innovation. I hope that my noble friend is able either to accept the amendment or reassure me that it is unnecessary. I beg to move.

Lord Whitty: If my noble friend's objective is to achieve flexibility and room for manoeuvre, the clause provides more than would be the case if it was amended in the way he suggests. The clause currently requires the tenderer not only to specify the area but to provide an outline of the local services to be provided. If we went further and required a specification as to

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routes, the room for innovation would be limited in terms of the tendering. The detailed routes may not be settled at the point of tender. We have deliberately framed the provision in a way which allows a degree of latitude to meet the transport needs of the particular area. If we simply specified pre-existing routes, or those routes plus a few desirable routes, it would place the process into a straitjacket whereas tenderers, particularly in a competitive situation, might well come forward with alternative ways to meet the transport requirements.

I believe that there is a respectable argument for keeping the provision in its present form and allowing the details of particular routes to be left to the tendering process. However, the process already requires a comprehensive outline of the routes to be provided. We believe that the local authority should have freedom of manoeuvre. The tendering process is itself a bit of an iterative process. With that explanation, I hope that my noble friend is content to withdraw his amendment.

Lord Stoddart of Swindon: I thank the Minister for that helpful reply. The noble Lord will understand that we need to think about the matter. We may want to return to the issue at a future stage, but I doubt it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Mackenzie of Culkein moved Amendment No. 142B:

    Page 76, line 36, leave out ("21") and insert ("12").

The noble Lord said: The amendment deals with the issue of time-scale. Clause 126(2)(b) provides for a 21-month delay in the introduction of a quality contract scheme once approval has been secured. I am not convinced that such a lengthy delay is necessary given that all the parties--they will include the existing operators--will have been consulted during preparatory stages and will appear, therefore, to have had ample time to plan ahead for the introduction of the scheme. I believe that a 12-month period is sufficient unto the day. However, it is a probing amendment. I ask the Minister why such a lengthy delay has been specified in the Bill. I beg to move.

Lord Hogg of Cumbernauld: Amendment No. 143, which stands in my name, is linked with Amendment No. 142B. The purpose of my amendment is to ensure that compensation is paid to bus operators who lose business--no doubt in some cases their entire business--as the direct result of the imposition of a quality contract.

The lack of a clause allowing for the payment of statutory compensation raises a number of issues: moral issues; employment issues; and issues of future investment. On moral grounds, it cannot be right for a business or a part of a business to be taken away as a direct result of a change in the law without some form of compensation being paid. I assume that the reasoning behind the Government's decision was that

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the 21-month lead-in period prior to a quality contract would be sufficient time for operators to adjust. I am afraid I find that difficult to accept.

Indeed, in the case of smaller operators who cover only a single area and who lose out as a result of exclusion from an exclusive contract, there will be nowhere else for them to go and it is very likely that liquidation, with resultant job losses, will be the only option.

That brings me to my second point concerning employment issues. In the case of larger operators, it is unlikely that all the bus workers could be found jobs in other parts of the country even if they wished to move. The issue of pension rights is one that would need careful consideration; and, at a time when the bus industry is working hard to retain staff through improved conditions of employment for workers, the loss of job security would be a serious blow.

Lastly, I turn to investment. While I am sure that the larger bus operators in the United Kingdom would be able to bear the loss of a certain amount of their business, there will still be an adverse effect on their ability to invest in better passenger services. The Government have a duty to ensure that bus passengers are not penalised as a result of this policy. I hope that my noble friend will clarify the Government's position and give me some assurances.

Lord Bradshaw: I support the noble Lord, Lord Hogg of Cumbernauld. There may be two fairly large bus companies in a town or city both of which have bought the companies, the ownership having passed on since the original days of privatisation. In the event of a quality contract being awarded, one of them could find that a large part of its business disappeared. It has purchased the goodwill of a business as well as the fixed assets such as the buses. It has taken over the labour, often under TUPE regulations. It seems only fair and, as the noble Lord said, natural justice that, provided the people who are dispossessed have been behaving normally, they should receive some compensation.

Is the Minister satisfied that the arrangement conforms with other law? Is the noble Lord satisfied that it is not open to challenge either here or in courts in other places?

Lord Dixon-Smith: Amendment No. 145, which stands in my name, is grouped with these amendments. It is a fortunate grouping. It sets out to achieve the same purpose as the amendment tabled by the noble Lord, Lord Hogg of Cumbernauld. If we were to flip a coin to see which amendment we preferred we might need a two-sided coin. His amendment may be better than mine. However, the principle is the same.

We are discussing the integrity of the process under which quality contracts as opposed to quality partnerships are made and awarded. If a quality contract is made only in those circumstances where nothing else will provide a service, there may not be a problem. The difficulty is that the Bill does not seek to

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define the circumstances under which a quality contract is appropriate as opposed to a quality partnership.

For perverse reasons, a local transport authority could fall out with someone who is providing bus services. It may decide that the solution is to provide a quality contract scheme and thereby deprive an otherwise reputable company or business of its livelihood. That would not be correct or proper. In that situation, the issue of compensation is entirely appropriate. We are not talking only of compensation for the business. There are questions of redundancy, as the noble Lord, Lord Hogg of Cumbernauld, said. There is the issue of redundant investment, and all those other factors.

If the Minister replies that the appropriate relevant authority approves a quality contract scheme in a situation where there were competitive services, we have no difficulty. But, if he cannot give that assurance, I suspect that we may need to think again. I am happy to support what has been said on the matter.

Lord Whitty: Despite the multi-party approach, I find the basic concepts of noble Lords misplaced. We are talking here about a contract from a public authority. It has changed the nature of the contract; nevertheless there is an open contract procedure. One company may not gain that contract; another company will do so. It is not normal for the public authority in such circumstances to compensate the loser for failing to get that contract. I do not envisage the situation as any different from any other public sector contract in that respect. All bus operators who already operate, or desire to operate, within that area will have been given a chance to bid. They will have had a fair chance. They will have received the invitation to tender; and they will have been able to put in a tender. It will be fair competition at that point. But, as with many other public services, at the point where the contract is awarded that contract becomes exclusive for the period in question.

We recognise that there could be a serious transitional problem in moving from one operator or partial operator to a single operator. There are staff, capital and operational implications. That is why we have provided for a period of 21 months to elapse and why we could not accept a narrowing of that period to 12 months. Clearly, in many circumstances we would need to deal with a transitional period for the transfer of staff, of routes and, in some cases, of buses.

The two issues which have been raised are complementary but in the opposite way to that in which they have been raised. As regards employees, raised specifically by my noble friend Lord Hogg, nothing in the Bill affects the normal application of TUPE regulations. Their broad purpose is to ensure the ordered transfer of employees. Where a quality contract scheme involves any transfer of an undertaking within the meaning of the regulations, as in most cases it would, the protections afforded by TUPE will have direct effect. The situation is more

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complicated in relation to pensions, but the TUPE arrangements which exist in normal circumstances may in future apply in these circumstances, too.

I therefore believe that Members of the Committee are barking up the wrong tree. The principle of a quality contract is that it becomes an exclusive contract and that compensation is not appropriate.

9 p.m.

Lord Bradshaw: The situation which the Minister described is credible in London where route tendering takes place and somebody loses a route or two as there is a swings-and-roundabout situation within the city. Some people have to move jobs not without disruption to their lives. However, within cities such as Manchester, it is possible that the Government will be taking away whole livelihoods. The opportunity of redeploying is less likely to arise in, say, Manchester than in relation to routes in London.

If quality contracts are let to a consortium of operators, that will not necessarily apply. However, I believe that in some cases a city-wide or PTE-wide quality contract could lead to someone having stranded assets. That would not apply in relation to the letting of contracts in London or to refuse disposal contracts.

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